by Bryce Edwards

26 August 2010

National to entrench backdoor state funding of parties

The illegitimate use of taxpayer funds by parliamentary political parties is set to be legalized and entrenched by the National Government’s proposed – but not widely debated – Parliamentary Services Amendment Bill 2010. This is quite a big deal. After all, the misuse of parliamentary funds by political parties has become the most controversial political finance problem in New Zealand. From the explosive Auditor General’s report on the 2005 general election spending on pledge cards etc, through to the controversy over ministerial credit card expenditure, the use of taxpayer funds by politicians has become one of the key issues in New Zealand politics. Although in the past the National party has been highly critical of the misuse of parliamentary funding by its opponents, it’s now keen to make this misuse worse. On surface appearances the proposed legislation appears to do the opposite – it appears to be clamping down on the use of parliamentary resources for partisan political purposes, but a closer reading of it shows that the key part of the legislation is that it only prohibits such expenditure for the three months prior to an election, leaving the parliamentary parties free to misuse taxpayer funds for approximately 2 years and 9 months of every parliamentary term. The implications of this indirect form of state funding are quite considerable – having the parliamentary parties generously funded by the state is not good for the party system and it’s not good for democracy. By making political parties reliant on parliamentary resources, the corollary is that they are less dependent on civil society; they don’t need to have deep and real connections with different organisations and movement in society; they don’t need to have large or active memberships. The parties increasingly become professionalized and removed from voters. What’s more the lesson from elsewhere is that this leads to – or increases – ideological convergence whereby political are increasingly all the same, and thus voters don’t have a meaningful choice at election time. This is why I put a submission into the Electoral Legislation Select Committee to oppose the bill. My oral submission (via telephone) yesterday was reported by NZPA – see: Bill could allow illegitimate use of taxpayer money: academic. My submission is reproduced below. [Read more below]

SUBMISSION OF BRYCE EDWARDS TO THE ELECTORAL LEGISLATION SELECT COMMITTEE ON THE PARLIAMENTARY SERVICE AMENDMENT BILL 2010

About the Submitter

This submission is made by Bryce Edwards in a personal capacity. I would like to address the committee by telephone to speak to my submission if that is possible. I am a political sociologist in the Politics Department of the University of Otago where I teach and research on issues in New Zealand politics. One of my areas of research is political finance, and I have written extensively on such issues – published on my blogsite (www.liberation.org.nz) and in various academic journals and books. I take a particular interest in issues of (direct and indirect) forms of state funding of political parties.

Summary

I oppose the Parliamentary Service Amendment Bill 2010 as it essentially legitimizes and legalizes the illegitimate use of taxpayer funds for partisan political electioneering. It does this by making such expenditure only illegal for the three months prior to an election, leaving the parliamentary parties free to misuse taxpayer funds for approximately 2 years and 9 months of every parliamentary term. Thus while the bill is ostensibly about fixing the problem of illegitimate state funding of political parties, it actually achieves nothing of the sort while actually making the problem worse. The only way in which the bill could be corrected would be if the bill’s limitations on the use of parliamentary-funded advertising is applied for the whole parliamentary term instead of just the ‘regulated period’ of the general election. The prohibition should also extend to other forms of parliamentary resources beyond just advertising. The main reason for opposing this introduction of state funding of political parties by stealth is because such funding arrangements have a highly detrimental effect on the party system and thus on democracy.

Introduction: Current misuse of state funds in Parliament

The misuse of parliamentary funds by political parties has become the most controversial political finance problem in New Zealand. This is because the most significant change in political funding in recent years has been the ‘revolution’ that has occurred in the state funding of the parties in Parliament. The parliamentary parties receive resources and services of about $140m a year. These are intended to permit them to carry out their legislative duties and serve their constituents, yet much of this is used for highly partisan activities – such as political advertising, market research, campaigning, and organizing their extra-parliamentary organizational activity.

About 1000 staff are employed by the Ministerial and Parliamentary Services, many of whom carry out party political research, marketing and organising. Out in the electorates, regional party organisers (previously paid for by the party organisation) have been replaced by electorate agents (paid for by the Parliamentary Service), and the electorate offices that they work in are now de facto regional party headquarters. Mail-outs, glossy leaflets and newspaper advertisements are also paid for by parliamentary funding.The most recent Annual Report of the Parliamentary Service shows a number of the budgets used by the parties in Parliament. For example, in one parliamentary budget used by the parties – the ‘Party and Member Support’ budget, the parties spent $14.9m during the 12 months to the end of June, of which National spent about $6m, the Greens about $1m and so on. On top of this, the parties spent another $1.7m on the budget of ‘Members Communication’.

The illegal misuse of taxpayer funds by parliamentary parties to pay for their 2005 general election campaigns was the biggest scandal to come out of that election. The Auditor-General Kevin Brady made a ruling – based on Crown Law advice – that $1.2m of taxpayer money had been illegally spent by most parties (and in particular by the Labour Party on its pledge card).

The unclear rules

It should be noted that the definitions of electioneering used by Parliamentary Service are incredibly faulty and have been written in that way to allow the budgets to be utilised for partisan-political activity because the definition of electioneering is extremely narrow.

The existing rules about the use of parliamentary resources are not sufficiently clear, and this is by design. Politicians often say that their political parties are prevented from misusing parliamentary resources by the existence of the Parliamentary Service monitoring taxpayer funds. However the rules are actually incredibly and deliberately loose and vague. This is because the Parliamentary Service is controlled by the same parties that it supposedly monitors. The true role of the Parliamentary Service is ‘corruption management’ in assisting parties make use of 'backdoor state funding'. This is, quite simply, a case of ‘poacher as gamekeeper’.

The criteria and parameters of how parliamentary resources can be used by the parties are made by the Parliamentary Services Commission (PSC), which is the cross-party parliamentary body that controls the Parliamentary Service and Ministerial Services. It is therefore a case of the recipients of the resources devising the rules on how they themselves can use them, something which might usually be viewed as a conflict of interest. As MP Jim Anderton has pointed out to Parliament, ‘It is not a good look for political parties to design schemes for party funding to get around the laws that they themselves are responsible for making’ (quoted in Sunday Star-Times, 6 May 2001: p.A2). This ‘poacher as gamekeeper’ situation appears to have led to a lax and dubious regime where parties are easily able to convert the lucrative resources into political tools.

The Parliamentary Service and Ministerial Services have a difficult role in administering the rules for what is effectively a covert system of state funding of parties and politicians. The two administrative bodies have little autonomy from the political parties as they are both controlled by the PSC. In 2003, the new General Manager of the Parliamentary Service, Joel George, ‘said the rules were "pretty permissive" but they were set by MPs and it was up to MPs to change them’ (Taylor, 2003d). This typifies the position of the administrators – they do not have the power to make or adjust the rules about the use of resources, but merely have to work with the rules made by the parties. In a sense their role is one of ‘corruption management’, in that they are expected to allow the parties who make the rules to misuse the funding for party-political purposes

The intention of the legislation

The recent review of political finance undertaken by the National Government chose not to deal with the problems of parliamentary funding in any serious way – despite it being the most serious problem in this area. Therefore the legislation that came out of the review had nothing in it to resolve this problem. Instead the government has put forward this separate piece of legislation to ameliorate the problem. However it not only ameliorates the problem in only a very limited way by merely restricting the misuse of taxpayer funds for a short period leading up to an election, it effectively makes the problem worse by declaring that for the rest of the parliamentary term the parties are free to go on misusing the expenditure.

Although some might see this limited change as ‘at least an improvement’ over the status quo, this would be to miss the fact that the current situation is universally seen as unsustainable and needing reform. Thus there will inevitably need to be some reform in this area, and so it is just a decision of ‘how much reform’. The status quo situation is not an option, so the idea of the current legislation being ‘better than nothing’ does not make sense.

The regulated period

The main problem with the proposed ‘solution’ is with the time frame involved. The Government proposes that the limitation on parliamentary parties only be in effect for their proposed ‘regulated’ period, which according to the Electoral (Finance Reform and Advance Voting) Amendment Bill 2010 will only be approximately three months. However, political parties currently misuse the parliamentary funding throughout the electoral cycle and the parliamentary term.

It needs to be noted that the modern election campaign is now permanent, and it is an anachronism to pretend that campaigning by politicians and parties only occurs in a certain period in the run up to the election. We now live in the age where politicians and political parties are constantly undertaking electioneering activities that seek to improve their public support in preparation for the following election. In terms of this, all branding and communication can be seen as an attempt to improve the number of votes received in the future.

Also, it has to be acknowledged that the laws limiting election expenditure have the perverse effect of triggering an early start to the election campaign by the parties. Thus if parliamentary parties are only restricted in using parliamentary resources for electioneering in the three months prior to polling day then they will simply spend such money prior to this period. Therefore if passed in its current form, this bill would allow a repeat of Labour’s 2005 pledge card as long as the party put the advertising out prior to the three month regulated period. In fact there are a whole host of other controversial electioneering that would be deemed legitimate. The recent Labour Party ‘Axe the Tax’ bus campaign created controversy due to it the fact that this highly-branded electioneering was funded by the Parliamentary Service. Other billboards and newspaper advertising would also be deemed legitimate by this legislation. For example, in in 2003, United Future bought about $80,000 worth of full-page colour advertisements in daily newspapers ‘to report on how it says it has made MMP work since the last election’ (McLoughlin, 2003). The ads outlined reasons to support the party and ways to contact it, albeit without actually saying ‘Vote United Future’ or ‘Join United Future’. Similarly, also in 2003, by National and New Zealand First of about 50 high-visibility outdoor advertising billboards. The billboards featured pictures of their respective leaders, Bill English and Winston Peters, with campaigning slogans, and were estimated to cost about $180,000 (Milne, 2003).

Prohibiting the use off parliamentary resources for political advertising at any time

There are not practical reasons to stop the use of parliamentary resources being used for electioneering at any time during a parliamentary term. The Parliamentary Service rules could easily be much more clearer. Despite protestation of the apologists of the backdoor indirect state funding, there are many ways to delineate parliamentary duties from party political functions. Since 2006 the rules have been slightly altered, but they are still incredibly loose, and could be made more realistic and useful if the word ‘explicitly’ was removed from the definition of electioneering. This definition currently conflicts with other definitions in legislation, and this is highly problematic and needs to be resolved. Regulations dealing with election law need to define election advertising in the same way that the Parliamentary Service rules define it. Thus, the Parliamentary Service could simply adopt the same definition of ‘election advertising’ used in the Electoral Act, making the use of parliamentary funds prohibited for any such communications at any time.

Some might attempt to argue that would be unworkable to prohibit parliamentary parties from using taxpayer funds to electioneer outside the regulated period. This is not a logical argument, as it is quite possible to draw up rules on what is and is not allowed to be done with state funds. Certainly the Auditor General did not have any problem in establishing some simply rules for determining what was legitimate use of state funds when he carried out his investigation in 2006.

In fact, following on the from the Auditor General’s 2006 report, there should be no real problem in legislation declaring that any communication that appears to be intended to persuade people to vote for or against any candidate or party cannot be paid for with parliamentary funding at any stage in the electoral cycle. This should be the case regardless of whether it mentions any party or candidate by name. This means that the false and duplicitous use of the wording ‘explicitly’ does not come into the definition of what is electioneering. Other defintion rules could be added to make this clearer - for example, no output that uses parliamentary funding should have a party logo on it.

But the most important single thing that should be done is to make all of the use of parliamentary and ministerial resources completely open to the public. A first step would be opening the Parliamentary Service to the Official Information Act. But it needs to be more transparent that even this. ‘Open the books’ should be the demand of all democrats. The second step would be for the Parliamentary Service to proactively publish on its website itemised information about all expenditure in a way that these taxpayer-funded budgets could be totally transparent.

MPs travel frequently throughout the country speaking to meetings held by their party organisations. Its all part of the ‘permanent campaign’. MPs even use their parliamentary travel budgets to go to their own party conferences. And of course during general elections, MPs – especially list MPs campaigning to increase the nationwide party vote – travel up and down the length of New Zealand campaigning with free travel expenses.

And as mentioned earlier, the parliamentary parties are provided with very generous budgets to run out-of-parliament operations, which normally means operating an office in their electorate. It is an open secret in Parliament that these taxpayer-funded electorate offices operate as party offices geared to organising the party locally, and working for either the re-election of their MP or an increase in the local party vote. At the most obvious level this can be seen in the offices being painted and branded as party offices, complete with party colours and logos.

Why state funding of political parties is bad for democracy

State funding has an important effect on the nature of political competition, especially in terms of consolidating the existing party system and artificially inhibiting change. Certainly in New Zealand, the overall effect of the system of state funding has been to consolidate the present players in the party system and prevent the entry of new competitors. The provisions of generous parliamentary funding operates as an impediment to the competitiveness of new parties in New Zealand politics. It is therefore significant that the only new political party to be elected to Parliament since the introduction of MMP is the Act party – every other new party has been established by at least one incumbent parliamentarian. Undoubtedly, state funding has reduced the organic attachment of political parties to society. They no longer have to rely on party members for voluntary work or societal groups and individuals for financial support. This produces greater independence and autonomy for the party elites in Parliament. Thus, according to Pierre et al., ‘there will be less interest in catering for the interests and opinions of the rank-and-file in the intra-party decision-making process’ (Pierre et al., 2000, p.3).

Undoubtedly, state funding reduces the political parties’ organic attachment to society. In particular, the state’s role in being the patron of the parties has an impact on their leaderships’ orientation towards rank-and-file membership. This is something that the Alliance’s Matt McCarten has also discovered: “There’s been a professionalisation of political leadership, backed up by state funding and resources for MPs which has distanced politicians from party rank and file…. In the old days you didn’t have big salaries and you had to rely on party volunteers more. Now politicians are no longer so reliant on the grassroots, they go direct to the media to put their message out” (quoted in Laugesen, 1999f: p.A3).

The Royal Commission on Electoral Systems also made this argument about the discouragement of membership recruitment: “We share the fears that have been expressed that an unnecessary increase in State assistance would reduce parties’ need to rely on their ordinary members for financial support and voluntary work. This could, we consider, lead to a lessened commitment to recruitment of, and responsiveness to, those members” (RCES, 1986: p.211).The Royal Commission clearly saw a positive linkage resulting from high party membership and the financial reliance on members: “For the most part, our parties have met their financial needs from small donations from their members and supporters. By concentrating on the establishment and cultivation of large membership bases, the parties have avoided relying on substantial contributions from either the State or a limited number of large institutions or corporations. This has had beneficial effects, both in terms of high political participation by ordinary New Zealanders and in terms of the responsiveness and representativeness of the parties themselves” (RCES, 1986: pp.216-217).

While the decline in membership has an array of causes, it’s clear that the flourishing of alternative source of resources for the parties greatly reduces the incentives for retaining a large party membership that brings in membership fees, other financial contributions and voluntary labour. Thus, according to Pierre et al., ‘there will be less interest in catering for the interests and opinions of the rank-and-file in the intra-party decision-making process’ (Pierre et al., 2000: p.3). Furthermore, the reliance on the state increases the autonomy of the leadership and reduces the power of the ‘membership strike’ or departure:

For the individual member, involvement becomes less interesting because members no longer control a critical resource in their exchange with the party leadership; as Hirschman put it, ‘exit’ are reduced. Public subsidies therefore contribute to the alienation and indifference of the rank-and-file membership and increase the centralisation of the party organisation (Pierre et al., 2000: p.3).

The independence from civil society that state funding affords political parties, also has a tendency to moderate their politics. As Simon Lemieux suggests in Britain, state funding enhances ‘the independence of parties by freeing them to a large extent from the ties of their present backers…. It might also lessen the polarisation between parties, where Labour are still (rightly or wrongly) seen as the party of the ‘workers’, and the Conservatives as the party of capitalism’ (Lemieux, 1995). This increasing independence (or weakening linkage) also means that some of the classic functions of parties, ‘such as the articulation of interests and the aggregation of demands, and perhaps also the formulation of public policy’ are becoming undermined (Mair, 1997: p.153).

While much has been written about the negative political implications of resources derived from civil society, little has been said about the implications of resources emanating from the public sector. It might be asked whether money from government is really so different to money from private sources. Arguably, such funding is no more neutral, just because it derives from state sources. In fact, the influence of state funding is substantial, affecting ‘the party system, the internal life of parties, the electorate’s view of parties, and the saliency of parties vis-à-vis other political actors’ (Pierre et al., 2000: p.13). Conversely, there is something to be said for the benefits of the private funding of political parties. For instance, it can be argued that it is actually very healthy for parties to be dependent for their existence on their ability to attract resources (of both a capital and labour variety) from their supporters. For this reason, the National Party has traditionally opposed the concept of state funding. As former party president George Chapman’s told the RCES: ‘Soliciting funds from the public may be tedious and time-consuming for the political parties but it has the beneficial effect of forcing the parties to expand their membership base and listen to the people. Contact between the branch committee member and the potential party member is a vital link in a participatory democracy. State funding can only weaken it’ (Chapman, 1986: pp.27-28).

It can be argued, therefore, that private funding of political parties is not necessarily undesirable. Instead of replacing the contributions of large corporations and labour unions, state funding possibly only supplants the contributions of individuals, which should in fact be encouraged as a form of political participation (Alexander, 1989b: p.16). Furthermore, there are good reasons for political parties to be reliant on even institutional sources such as corporations or trade unions, to fund their activities. These sources of support and political pressure provide an ideological anchor, and becoming free from such organisational ties encourages ideological convergence, as parties no longer need to represent distinct social constituencies (and thus Labour is less the party of working people and National is no longer simply the party of business). Instead, parties become more independent from social groups, tending to be the vehicles of office-seeking politicians and prone to political convergence. As Patrick Seyd has pointed out, the effect of state funding is to weaken a linkage that helps structure and organise the party system: ‘It is attempting to tamper with existing conflicts and party alignments. For example, company and trade-union support of parties reflects one division of interest in society… [and] to argue that ‘State funding of political parties could remove the insidious connection between politics and vested interests’… is to fail to recognise that politics is about interests and linkages’ (Seyd, 1998a: p.204).

Any fundamental changes in party resources, such as increased state funding of parties, undoubtedly cause other changes to political competition. In particular, this intervention of the state interferes with the ‘market function’ of the party system. Hence, although state funding might ‘solve’ the financial problems that political parties are having in raising funds from civil society, it also masks the reasons why the New Zealand public no longer voluntarily give financial support to the parties and thereby allows the parties to avoid the deeper problems that afflict them. This is a point acknowledged by the RCES: ‘if parties no longer have a need to solicit funds from the public, the overall political process may stagnate and the natural growth and decline of political parties may be inhibited. Political parties are voluntary organisations and the extent to which a party can attract financial support is, at least in part, a reflection of that party’s appeal to the electorate’ (RCES, 1986: p.211).

Conclusion

The public now has a much more critical attitude towards political finance and is sensitive to politicians’ misuse of public resources for political gain. Increasingly this illegitimate use of resources is being correctly seen as ‘corruption’.

The proposed legislation will not actually address this problem, as the vast amount of this misuse occurs outside of the three-month period before the general election. Thus this bill could be seen as just another part of the ‘corruption management’ process that occurs in Parliament. It seeks to resolve the problem in the public’s mind while effectively making the misuse of taxpayer resources even more likely. What’s more, the legislation explicitly endorses the previous vague and flexible rules that existed before the Auditor-General intervened in 2006.

So instead of tightening the rules – as most voters would expect – this bill means that New Zealand’s backdoor state funding of parties will be further entrenched. Parties in Parliament will be able to get away with the blatant use of parliamentary funding to purchase more pledge cards, billboards and media advertising. This state funding has a myriad of negative effects on democratic competition – not only does it protects incumbent MPs and parties, it also makes them much more divorced from any real and organic connections with civil society. Thus any MP voting for this legislation will be exacerbating what is an already severe situation.

The political tide is clearly moving towards a demand for transparency and restraint on the use of public money by politicians, and the parties’ attempt to give only an inch on this matter ultimately will not be enough for a public that no longer trust political parties and parliamentarians.

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Notes for telephone oral submission

This is a highly significant piece of legislation – and it doesn’t really appear to be receiving the necessary consideration and scrutiny that it deserves. The reason that it is so significant is that it essentially is formalizing, entrenching and legalizing a backdoor form of state funding of political parties in New Zealand. And that’s why I oppose this bill.

The implications of this indirect form of state funding are quite considerable, which is what I attempt to convey in my submission. Having the parliamentary parties generously funded by the state is not good for the party system and it’s not good for democracy. By making political parties reliant on parliamentary resources, the corollary is that they are less dependent on civil society; they don’t need to have deep and real connections with different organizations and movement in society; they don’t need to have large or active memberships. The parties increasingly become professionalized and removed from voters. What’s more the lesson from elsewhere is that this leads to – or increases – ideological convergence whereby political are increasingly all the same, and thus voters don’t have a meaningful choice at election time.Now, why do I say that this bill formalizes, entrenches and legalizes a backdoor form of state funding of political parties? On surface appearances it appears to do the opposite – it appears to be clamping down on the use of parliamentary resources for partisan political purposes. But the key part of the legislation is that it only prohibits such expenditure for the three months prior to an election, leaving the parliamentary parties free to misuse taxpayer funds for approximately 2 years and 9 months of every parliamentary term. Thus while the bill is ostensibly about fixing the problem of illegitimate state funding of political parties, it actually achieves nothing of the sort while actually making the problem worse.

The misuse of parliamentary funds by political parties has become the most controversial political finance problem in New Zealand. From the 2006 Auditor General’s report on the 2005 general election spending on pledge cards etc, through to the controversy over ministerial credit card expenditure, the use of taxpayer funds by politicians has become one of the key issues in New Zealand politics. And it’s not an issue that is about to go away.

Anyone supporting this legislation in the House will essentially be aiding and abetting the process of ‘corruption management’. And that’s exactly what this is all about. It’s about politicians and political parties getting their hands on resources and using them for illegitimate purposes. So the only correct way to deal with this bill is to extend its prohibition on using state resources for partisan political communication to include the whole parliamentary cycle – not just the very limited three months prior to an election.

Comments

National to entrench backdoor state funding of parties

The illegitimate use of taxpayer funds by parliamentary political parties is set to be legalized and entrenched by the National Government’s proposed – but not widely debated – Parliamentary Services Amendment Bill 2010. This is quite a big deal. After all, the misuse of parliamentary funds by political parties has become the most controversial political finance problem in New Zealand. From the explosive Auditor General’s report on the 2005 general election spending on pledge cards etc, through to the controversy over ministerial credit card expenditure, the use of taxpayer funds by politicians has become one of the key issues in New Zealand politics. Although in the past the National party has been highly critical of the misuse of parliamentary funding by its opponents, it’s now keen to make this misuse worse. On surface appearances the proposed legislation appears to do the opposite – it appears to be clamping down on the use of parliamentary resources for partisan political purposes, but a closer reading of it shows that the key part of the legislation is that it only prohibits such expenditure for the three months prior to an election, leaving the parliamentary parties free to misuse taxpayer funds for approximately 2 years and 9 months of every parliamentary term. The implications of this indirect form of state funding are quite considerable – having the parliamentary parties generously funded by the state is not good for the party system and it’s not good for democracy. By making political parties reliant on parliamentary resources, the corollary is that they are less dependent on civil society; they don’t need to have deep and real connections with different organisations and movement in society; they don’t need to have large or active memberships. The parties increasingly become professionalized and removed from voters. What’s more the lesson from elsewhere is that this leads to – or increases – ideological convergence whereby political are increasingly all the same, and thus voters don’t have a meaningful choice at election time. This is why I put a submission into the Electoral Legislation Select Committee to oppose the bill. My oral submission (via telephone) yesterday was reported by NZPA – see: Bill could allow illegitimate use of taxpayer money: academic. My submission is reproduced below. [Read more below]